See: Headwinds in 2020 largely in the price as Manulife US REIT looks forward to 2021
Despite weaker results, analysts are all keeping their “buy” calls on the REIT. DBS Group Research has a target price of 90 US cents, lower than US$1 previously. But still liking the stock as it is trading at about 8% yield and 1 time P/NAV.
Analyst Vijay Natarajan says in a Feb 9 report, “2HFY2020 results slightly missed mainly due to provisions. US office leasing activity has started to pick up with vaccine roll-outs and the gradual return of employees back to offices. Management is on the lookout for portfolio acquisitions and M&A opportunities to further diversify and position its portfolio in growth sectors.” The REIT is also open to divest some of its mature assets if a good opportunity arises. “With gearing at 41%, any acquisitions ahead is expected to be a combination of debt and equity and we believe accretive acquisitions are still possible with low cost of debt of c.2% and a wide range of US office cap rates at 5.5-7%,” says Natarajan.
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OCBC Investment Research continues to rate MUST “buy” with a fair value estimate of 83 US cents. “We expect leasing momentum to remain soft in FY2021 as tenants reassess their office space requirements, and plan for a very gradual re-entry to the office. However, MUST’s minimal lease expiry profile in 2021, resilient portfolio with long WALE of 5.3 years, and annual rental escalation of 2.0% could limit downside risk and provide income stability,” says analyst Chu Peng. And with the rollout of vaccines in the US, MUST is poised to benefit from the gradual reopening and recovery of economy. Similarly, PhillipCapital has a target price of 84 cents. Analyst Natalie Ong says, "Rental collections improved from 94% to 97% in 4QFY2020. MUST booked a US$3.6 million impairment for receivables in 4QFY2020, mainly from one retail and several F&B leases. Half of its credit provision was attributed to this retail tenant. In February 2021, MUST managed to get the tenant to agree to repay the arrears in full. Writing back the arrears, collection rate would have been 99%."
mainly from traditional office-using sectors such as legal, real estate, information, finance and insurance. New leases, renewals and expansion accounted for 35.6%, 58.7% and 5.7% of the leases signed. On the outlook, MUST is eyeing new tenant in the New Economy sectors and business parks, expecting soft leasing in the near term and expecting US$3 million in interest saving from refinancing. As at 3.35pm, units in MUST are trading at 72 cents or 1.0 time FY2021 book with a dividend yield of 8.1%, according to RHB’s estimates.